Goodwill looks to buy companies for programs

The acquisitions will give it new training grounds as it develops new workforce programs

The moves are part of a larger strategic plan aimed at reducing unemployment and supporting those in jobs

Dan Varner, CEO, Goodwill Industries of Greater Detroit

A prominent Detroit nonprofit is going into acquisition mode.

In an effort to expand capacity for its workforce development programs, Goodwill Industries of Greater Detroit plans to hunt for businesses to add to its stable early in 2018. In some cases, the plan's ultimate aim is to give the workers it trains a share of ownership in companies it acquires.

It hopes to close its first deal by the end of next year, targeting healthy companies that align with the new areas of occupational training it plans to launch.

It will also seek other companies with owners looking to retire and open to selling their company to Goodwill while it trains their employees to take over ownership.

"Folks in our community who are making a low wage, a minimum wage, one way to tackle that is to give those folks a share of the business," Goodwill CEO Dan Varner said. "There are plenty of opportunities for low-wage workers to actually earn a share of the profit as well as their wage and to have an asset on their personal balance sheet that they can take loans against to buy a house or buy a car."

With assets totaling about $22 million at the end of last year, Goodwill is in a strong financial and operational position, so it has an opportunity to innovate, he said.

The nonprofit, whose board is led by retired JP Morgan Chase executive Jane Bowman, could finance some acquisitions itself or take on debt for the right opportunity, Varner said.

It's also a model that could be ripe for social investment.

"We think our model can provide a little bit of a social return for those folks and at the same time accomplish the social mission that's important to Goodwill."

The planned acquisitions are just one of the strategies Goodwill is rolling out with its new strategic plan aimed at workforce and personal development.

Among other things, it's looking to expand its current business lines of manufacturing, industrial recovery and upscale thrift stores; develop an employee retention program; and increase its service sites in the suburbs.

New strategies

Goodwill has been really good, Varner said, at the basic training that sets people up for jobs, including resume building, interview skills, professionalism and communication. It's done some occupational training but wants to do more.

It serves 10,000 people each year and 900 companies.

Currently, Goodwill operates three businesses that provide job training opportunities and revenue to support its mission: its familiar thrift stores; Green Works Inc. industrial recycling; and light assembly and kitting as a tier-one automotive supplier. In line with its goal to reduce unemployment, Goodwill has begun efforts to expand its business in each of those lines.

This summer, it moved into e-commerce, selling select items from its thrift shops in the region on shopgoodwill.com, a national website offering items from around the country. So far, the early returns have been good, Varner said, but it's a tricky business model. "You don't want to do too much online, because then you destroy the treasure hunt in the stores."

But the e-commerce and retail businesses could provide an opportunity to help fill the jobs Amazon will be bringing to town with its new warehouse and fulfillment sites, Varner said.

"We're doing e-commerce — not Amazon style e-commerce, but it's e-commerce," Varner said. "We can train people to actually go work with Amazon."

Goodwill is continuing to seek new customers in its industrial asset recovery business which has long served DTE Energy Co. but expanded to serve about 20 Midwest companies in recent years. And it's looking for opportunities to move into other manufacturing segments, Varner said.

"Nobody knows where automotive is headed exactly. ... We just think it makes sense to explore other manufacturing training opportunities for the folks we are serving," he said.

The acquisition game

Even as it looks to expand its current business lines, Goodwill is looking to acquire new ones.

"We're not prepared to double down on any one right now, but we are interested in expanding and touching on many going forward," Varner said.

Focus areas include health care, manufacturing, construction, information technology, retail, hospitality and entertainment, as well as are other areas, Varner said.

The businesses it buys in those training areas would provide both short-term training opportunities for people like those returning from prison who need to show a recent work history and long-term training and jobs for people who need them, Varner said.

"We serve populations living with developmental (and physical) disabilities and mental illness who are not transitioning into work quickly but do eventually want to transition into (permanent) work," he said.

That could mean looking for a business that allows Goodwill to employ those people for two or three years so that those clients can have the necessary transition period to move into competitive employment.

Goodwill also plans to look for businesses it can own for three to five years while it trains employees to be owner-operators and then sell the business to them.

Deborah Groban Olson, executive director of the Center for Community-Based Enterprise, said in an October column published in Crain's Detroit Business that 400,000 jobs are at risk as Metro Detroit business owners without a succession plan look to retire.

"Many owners are interested in ... sell(ing) to their employees but choose not to, ultimately, because the process can be long and complicated," Varner said.

Goodwill can serve as an intermediary owner of the business until employees are trained to be owner operators, he said.

Expanded mission

The Detroit-based agency's mission has long been to put people with employment challenges to work. It's tweaked that, now, to focus on co-creating independence and dignity through the power of personal and workforce development.

"Our assumption when somebody gets a job is that they are headed down the path toward independence, dignity, financial security, self esteem and those kinds of things," Varner said. "But it's not a given, and sometimes you've got provide some additional support in order to make that happen."

Goodwill is developing an employee-retention program modeled after The Source in Grand Rapids, a nonprofit employee support organization.

Supported largely through employer contributions, Goodwill's retention service would help entry-level, low-wage employees overcome barriers they face to keep their jobs.

Employers could expect to see a return of more than 200 percent on their investment in the program through reduced employee turnover costs, Varner said.

Goodwill is recruiting employers now and plans a formal launch of the program sometime in the first quarter.

As it develops new personal and workforce development programs, Goodwill plans to take its programs even further into the suburbs.

The nonprofit does a lot of work in Detroit and Oakland County but not as much in Macomb, Livingston and Washtenaw counties.

"We're cognizant of that shift taking place … and we want to be responsive to it," he said. "We've got an obligation to serve those areas just like foundations do."

As it looks to expand its programs, Goodwill is also looking to build a culture of philanthropy, something new for a nonprofit that has long relied on social enterprise to produce revenue in support of its mission.

"Goodwills are … really good at soliciting clothing donations. But we're not great at fundraising; never have been," Varner said.

"We don't want that to eclipse our core DNA which is that of a social enterprise, but we want to get better at fundraising."